Kerr Neilson lost over $500m in six years. Then he made it all back

At 74, Kerr Neilson, one of the godfathers of Australia’s funds management industry, should be enjoying a quieter life like many septuagenarians. One that focuses on investing his private share portfolio, on philanthropy and on his passion for travel.

Instead, for the past six years, the driven and confident billionaire has been intent on recouping the $585 million wiped from his personal wealth.

Neilson’s wealth took a substantial hit after his 21.5 per cent shareholding in Platinum Asset Management plunged almost 80 per cent in value since mid-2018. That was the year he stepped down as chief executive of that funds management group.

For the past six years, Kerr Neilson has been intent on recouping the $585 million wiped from his personal wealth.Credit: Steven Siewert

“I have actually remedied that loss that I suffered by being active in the markets,” said Neilson. “I’ve been working hard.”

Last year, Neilson’s wealth was estimated at $1.24 billion by The Australian Financial Review’s annual rich list.

Neilson’s wealth was also cut substantially after the 2015 divorce from his wife Judith Neilson, which resulted in their joint shareholding of 43 per cent being split. Her wealth was estimated at $1.43 billion last year.

In a wide-ranging interview, Neilson discusses his current portfolio, which mostly comprises international stocks; the picks that helped him remedy his Platinum loss; and also the investments that have not done so well.

Neilson also explains why his Platinum shareholding is no longer for sale.

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Neilson co-founded Platinum Asset Management in 1994 with Andrew Clifford. Neilson, originally from South Africa, had set up Platinum after a stellar career managing money at Bankers Trust. One of Platinum’s first investment mandates came from billionaire hedge fund trader George Soros.

Neilson steered Platinum through years of good and bad performance but in 2018, he decided to step down as chief executive and was succeeded by Clifford.

In the ensuing years, Platinum’s performance, funds under management and share price began to deteriorate. Neilson, who remained a director on Platinum’s board, started to privately and then publicly agitate for management and strategic change, including the removal of Clifford as CEO.

Andrew Clifford succeeded Kerr Neilson as chief executive of Platinum Asset Management, and held the dual roles of CEO and chief investment officer. Credit: Dominic Lorrimer

Clifford was originally appointed into that role with Neilson’s blessing. When he became CEO, Clifford also retained his role as chief investment officer. As the fund manager’s performance declined, this dual role would become a sore point.

Clifford has avoided commenting and engaging in a public spat with Neilson.

In 2022, Neilson quit the Platinum board in frustration. He said the board wasn’t heeding the changes he thought were required to stem Platinum’s decline.

Then in early 2023, Neilson effectively put his Platinum stake up for grabs. Neilson is Platinum’s largest shareholder.

Since then, Neilson has done an about-face on his intention to sell his stake, partly because some of the changes he agitated for at Platinum have now occurred, including Clifford stepping down as CEO. Also, the idea of Platinum potentially being merged with another fund manager didn’t appeal.

Neilson said he wasn’t interested in an outcome for Platinum that would have been “just to smash companies together and take out costs”. “My position from four years ago was to use my 21 per cent to get a new CEO appointed,” he said.

“I was more interested in understanding who’s going to lead this change because to smash things together without changing the structure within the investment team would do no good.”

He confirmed one of those suitors had been Phil King’s Regal Partners, which has had an active role in consolidation in Australia’s funds management sector.

Regal Partners took a 5.6 per cent stake in Platinum in late 2022 but it sold out last year.

Another speculated contender for the stake was veteran fund manager Geoff Wilson and his eponymous firm. However, Neilson said he hadn’t spoken to Wilson or anyone from his firm.

Neilson said if his Platinum shareholding was offered to Wilson, then it was possibly through an opportunistic third party.

Wilson declined to confirm if Wilson Asset Management was approached. Instead, Wilson said the big question for Platinum now “is whether the new CEO and management team can turn the business around”.

Last December, Clifford was replaced as CEO by Jeff Peters. Peters formerly worked for Columbia Threadneedle Investments and Putnam Investments. He had also run the asset management practice at McKinsey.

Neilson participated in meeting the CEO candidates that were to replace Clifford but he wasn’t involved in the final decision that settled on Peters. He’s since had one meeting with Peters.

Following his appointment, Peters did a review and announced changes to the leadership and structure of different Platinum funds, and also that $25 million in costs would be taken out of the business.

Neilson said he expected that Platinum would lose some momentum as it went through the current restructure. “They have the personnel to rebuild the business,” he said. Asked whether the cuts were enough, Neilson said more savings, in addition to the $25 million, could be found in the administrative side of Platinum.

Jeff Peters replaced Andrew Clifford as Platinum Asset Management’s chief executive last December.Credit: Peter Rae

In March, Platinum revealed it had suffered a further blow to funds under management, with the loss of a $1.4 billion mandate. In February, its funds under management stood at $15.6 billion. It was a substantial fall from mid-2018, when its funds under management were $25.7 billion.

The principal driver of funds under management is an asset manager’s performance. Platinum’s performance has suffered more recently because of its underweight positions in United States tech stocks, weighing on its relative returns.

Neilson said he would be watching the performance of the two principal Platinum funds for a sign the turnaround was working. “If you turn your performance around within six months, people start noticing. So then, redemptions cease and then within 12 months, you could start seeing some inflows,” he said.

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Neilson has a personal portfolio of nearly 100 stocks. In contrast to Platinum, he’s been a big holder of some of the US tech stocks for the past six years, some of which have doubled in value. “I’m a very patient investor. I do have long holding periods. We’ve been in a rollicking bull market,” he said. Still, he believes the US tech stocks are beginning to “get a bit expensive now”.

The biggest positions in his portfolio have been in Amazon, Meta, Microsoft, Alphabet, Booking Holdings, Flutter Entertainment, Fujifilm, Siemens, Samsung, General Electric and Saint-Gobain. More recently, he said he had built a big position in Puma.

He also owns Toyota and a number of gold stocks including Barrick. In the Australian market, he has a holding in Paladin Energy.

As an example of his stock picking, he explained why he liked Fujifilm. He said it’s the company’s successful reinvention of itself throughout its history, and more recently with its Diosynth Biotechnologies division, which is one of the world’s largest contract manufacturers of biopharmaceuticals.

Less successful investments in Neilson’s portfolio have been bets on Canada’s Mercer International and Japan’s Rakuten.

He said about one-third of his portfolio was exposed to the US.

Neilson said it was not just about picking individual stocks, but understanding different economies, finding opportunities and removing doubts, and then sizing the bet and finessing the timing of it.

He said Chinese stocks were looking cheap now, but questions remained about the Chinese government’s ability under President Xi Jinping to bolster domestic consumption, particularly as China’s troubled real estate market is such a big drag on growth.

And as for Platinum, he’s patiently waiting and watching.

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